If You Want to Retire Early but Don’t Want to Scrimp, ‘Fat FIRE’ Might Be for You

fat fire image GettyImages
Fat FIRE is an interpretation of Financial Independence, Retire Early (FIRE) in which you budget for $100,000+/year in expenses upon retirement.
We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.

You can pursue financial independence without giving up the finer things in life.

“I have the ability to splurge on quality and luxury items and experiences, including world travel,” says Teri Ijeoma, founder of Trade & Travel, an online course that teaches an advanced form of stock market trading as a way to create supplementary income. Ijeoma is work-optional at age 38, and first stumbled across the idea of becoming work-optional while still at her day job.

“Back when I worked as an assistant principal, I hid in my office placing trades,” she says. “Unexpectedly, my boss strolled in at the moment my computer announced, ‘Your trade is successful.’ That day, I made more in one trade than an entire month of my salary. At that moment, I knew trading was my exit strategy.”

Teri’s lifestyle is an example of Fat FIRE, a beefed-up version of FIRE (Financial Independence, Retire Early) in which you no longer work, but anticipate more than $100,000/year in annual living expenses. If you want to pursue early retirement, but don’t want to live on a tight budget, the Fat FIRE approach may be what makes the most sense for you. With enough time and the right planning, you can get there too by increasing your earnings and putting the excess income in investment vehicles such as low-cost, low-risk index funds. 

Here’s what you need to know about how to achieve Fat FIRE and overall financial independence.

What Is Fat FIRE?

The FIRE movement is about calculating your FIRE number – the amount of invested assets you need to live off of investment income and retire early – and then increasing your income and lowering your expenses to reach your net worth goals faster. A ballpark FIRE number can be calculated by multiplying your annual expenses by 25.

Annual expenses x 25 = FIRE number

This equation was popularized in the research paper Retirement Savings: Choosing a Withdrawal Rate That is Sustainable, written by three Trinity University professors and published in the American Association of Individual Investors Journal in 1998. Better known as the Trinity Study, the paper’s data set calculated that retirement plans over a certain net worth which had withdrawal rates of 4% per year or less had a 0% of running out of funds.

By keeping your expenses low, you’ll hit your FIRE number sooner, an approach known as traditional FIRE. But some people don’t want to keep their expenses low, or they can’t because of certain family circumstances. Enter Fat FIRE.

“While we originally set our sights on Lean FIRE, we changed our goals after a few realizations,” says Brian Davis, a real estate investor and founder of SparkRental, a company that helps middle-class people replace their salary with passive rental income. Davis and his wife live overseas to support her job as an international school counselor. “First, I realized that my wife would never be content with a ‘lean’ lifestyle,” Davis says. “But I also realized that, while we can live comfortably overseas on a relatively modest income, we could end up back in the U.S. at any time. Our parents are getting older, and their health will decline at some point. Or we may simply get sick of being so far away from our family and friends. Regardless, I can’t count on a low cost of living forever.”

The Fat FIRE Lifestyle

Fat FIRE is typically classified as pursuing a FIRE number of $2.5 million or more—which, with a 4% withdrawal rate, would yield income of $100,000 a year. The motivations of Fat FIRE enthusiasts may include:

  • Solving for early retirement while also covering the cost of raising children.
  • Budgeting for vacations or lots of travel so you can use your retirement time to see the world.
  • Having the freedom to spend on luxury goods or pleasantries.
  • Wanting to retire in a city or location that has a higher cost of living.
  • Including elder care costs or supporting a loved one in your early retirement budget.

“I am a single woman with no children, so I am in a position to enjoy this wealth myself,” says Ijeoma. “But most importantly, I can offer these same experiences to the people I love and care for.”

Fat FIRE vs. FIRE 

Fat FIRE is the same as regular FIRE, but the numbers are bigger across the board. You want a lifestyle that will require higher monthly expenses, which means your FIRE number and annual investment income will need to be higher and may take longer to achieve. 

Davis and his wife are currently at about $600,000 in net worth, and on track to break the seven-figure mark in the next two years. “We’re still pretty far from some of our goals,” he says. “But it’s more about comfort and flexibility and reassurance as opposed to retirement itself.” 

The $2.5 million net work benchmark can feel steep; know that some people achieve FIRE and retire early with $1 million or less in their retirement savings. Here are some other versions of the FIRE movement, arranged from low to high with regard to how much money you’ll need to exit the workforce.

Fat FIRE vs. Coast FIRE

Coast FIRE is a retirement planning strategy that cuts the “retire early” part out altogether. It’s more about peace of mind.

In Coast FIRE, you aspire to reach a certain threshold at which your accounts have enough money invested to let compound interest get you the rest of the way to your FIRE number. When you hit your Coast FIRE number, you can stop contributing to your retirement accounts, freeing up monthly income. You don’t have to stop contributing to your accounts when you hit Coast FIRE (also known as Coast FI), but it’s an option.

Related: ‘Coast FIRE’ Can Give You Peace of Mind About Retirement. This Formula Shows How Much Money You’ll Need

Pro Tip

You don’t have to work full-blast all the way up until the day you retire. Consider checkpoints on your journey toward your Fat FIRE number in which you can downshift your workload and create more freedom.

Fat FIRE vs. Barista FIRE

In Barista FIRE, you keep a part-time or low-stress job in retirement for residual income and health insurance to help offset annual spending costs. Many Americans aspire to Barista FIRE without even realizing it; they want to accumulate enough wealth to change or downshift their career.

The name “Barista FIRE” is a nod to Starbucks, which made waves when it began offering health insurance to employees who average 20 hours of work a week. You’re not fully retired, but you’ve downshifted out of an intense career in order to enjoy life more now.

Related: Is Your Starbucks Barista Secretly a Millionaire? Why Early Retirees Are Embracing ‘Barista FIRE’ To Still Have Health Insurance

Fat FIRE vs. Lean FIRE

In Lean FIRE, work is completely optional. Lean FIRE is a net worth benchmark that assumes you’ll only have minimum expenses for food, housing, and transportation in retirement. Lean FIRE is sometimes defined as a lifestyle in which your current annual spending will remain under $40,000/year in retirement.

Going by the Trinity study, a Lean FIRE lifestyle would require an investment portfolio worth $1 million. In contrast, Fat FIRE anticipates annual expenses of over $100,000/year in retirement, which requires a portfolio worth $2.5 million. If you’re pursuing your Fat FIRE number, you’ll reach and pass your Lean FIRE number along the way.

Related: ‘Lean FIRE’ Can Help Middle-Class Americans Become Financially Free. Calculate This One Number to Get Started

The Common Denominator: Paying Down Debt

A common theme among FIRE approaches is to aggressively pay down debt now so that you’ll be less burdened by expenses in retirement.

Related: Our Family Achieved FIRE at 39 and 41 on Salaries Of Under $100K a Year. Here’s How We Did It

“As my income grew, I became dogmatic about paying off all of my debt,” says Ijeoma. “Now I’m debt-free even though I own multiple homes; I invested in some passive income [drivers], such as renting out my homes, Airbnb super hosting, and stablecoins, which give me interest each month.” 

For the entrepreneur, adopting a FIRE lifestyle is about stepping into who you truly want to become in life, says Ijeoma.

“Now I purely work for fun and purpose. I feel like I still have a lot to give to the world.”